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US Empire state manufacturing dropped to -2.15, worst since 2009

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    ActionForex.com
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    US Empire State Manufacturing Survey general business conditions index dropped a massive -34pts to -21.5 in March, well below expectation of 8.7. it’s also the worst reading since 2009. Looking at some details, new orders dropped -3.14 to -9.3. Shipments dropped -20.6 to -1.7. Delivery times dropped -6.1 to 2.2. Number of employees dropped -8.1 to -1.5. Average employee workweek dropped -9.6 to -10.6.

    Full release here.

    Fed’s Goolsbee: Job market getting into better balance

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      ActionForex.com
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      Chicago Fed President Austan Goolsbee, in recent comments to CNBC, noted that the job market is “getting into better balance,” a sign that the central bank’s policies may be having the desired effect without tipping the economy into a sharp downturn.

      The Chicago Fed head also mentioned the need for a shift in focus from the height of rate hikes to the duration for which these elevated rates might need to be maintained.

      “As long as we’re making progress,” he remarked, “the moment of arguing how high should the rate go is going to fade to how long should we keep rates at this level as inflation is coming down.”

      US ISM services dropped to 55.9, corresponds to 2.5% annualized growth in real GDP

        By
        ActionForex.com
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        US ISM Services PMI dropped -0.7 to 55.9 in November, slightly below expectation of 56.0. Business activity dropped -3.2 to 58.0. New orders dropped -1.6 to 57.2. Employment rose 1.4 to 51.5.

        ISM said: “The past relationship between the Services PMI™ and the overall economy indicates that the Services PMI™ for November (55.9 percent) corresponds to a 2.5-percent increase in real gross domestic product (GDP) on an annualized basis.”

        Full release here.

        US durable goods order jumped 2.7%, ex-transport orders rose 0.4%

          By
          ActionForex.com
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          US headline durable goods orders rose 2.7% to USD 258.5B in March, much stronger than expectation of 0.7%. Ex-trans orders rose 0.4%, also better than expectation of 0.2% . Ex-defense orders rose 2.3%. Transportation equipment rose 7.0% to USD 93.8B.

          Full release here.

          France Le Maire said EU ready to riposte new US tariffs

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            ActionForex.com
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            In response to the threat of new tariffs by US, French Finance Minister Bruno Le Maire criticized the proposals as “unacceptable”. He warned that EU would be “ready to riposte” to the tariffs. Junior Economy Minister Agnes Pannier-Runacher also said France would be “pugnacious” in its dealings with US. And,

            Late Monday, US Trade Representative said it’s considering to impose punitive tariffs of up to 100% on USD 2.4B of French champagne, handbags, cheese and other products, as response to the country’s new international digital services tax. USTR said such tax was “inconsistent with prevailing principles of international tax policy”.

            Asian Update: Aussie knocked down by RBA Lowe, Yen jumps

              By
              ActionForex.com
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              Australian Dollar is under broad based pressure today after surprised turn in RBA Governor Philip Lowe’s stance. To him, the next interest rate move is no longer more likely a hike, but evenly balanced. Aussie reversed all of yesterday’s gains and is indeed the weakest one for the week too. New Zealand Dollar follows as the second weakest for today and then Canadian.

              Meanwhile, Yen jumps broadly today even though there is no sign of risk aversion. It’s probably more due to the selloff in Aussie again. Sterling is recovering some ground too. Dollar follows as the third strongest while Trump’s State of Union Address is largely ignored by the markets.

              For the week, Dollar is so far the strongest one, followed by Kiwi and then Yen. Aussie is the weakest, followed by Sterling and then Euro.

              In Asia:

              • Nikkei is currently up 0.27%.
              • Japan 10-year JGB yield is down -0.0082 at -0.017, staying negative.
              • China, Hong Kong and Singapore are still on lunar new year holiday.

              Overnight:

              • DOW rose 0.68%.
              • S&P 500 rose 0.47%.
              • NASDAQ rose 0.74%.
              • 100year yield dropped -0.022 to 2.702, defended 2.7 handle.

              ECB hikes 50bps, next move data-dependent

                By
                ActionForex.com
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                ECB raises the three key interest rates by 50bps today. After that, the main refinancing, marginal lending facility and deposit facility rates will be 3.50%, 3.75%, and 3.00% respectively.

                There was no reference to further tightening in upcoming meetings. Instead the governing council will continue with a “data-dependent approach”, with decisions determined by inflation outlook, dynamics of underlying inflation, and strength of monetary policy transmission.

                In the new economic projections, headline inflation forecast was revised down across the horizon. But core inflation forecast was revised up in 2023. GDP growth forecast is also revised up in 2023.

                • Headline inflation is forecast to average 5.3% in 2023, 2.9% in 2024, and 2.1% in 2025. The estimate was downgraded from December’s 6.3% in 2023, 3.4% in 2024, and 2.3% in 2025.
                • Core inflation is projected to average 4.6% in 2023, 2.5% in 2025, and 2.2% in 2025. Comparing to December projections of 4.2% in 2023, 2.8% in 2024, and 2.4% in 2025.
                • GDP growth is forecast to average at 1.0% in 2023, 1.6% in 2024, and 1.6% in 2025, comparing to December’s forecast of 0.5% in 2023, 1.9% in 2024, and 1.8% in 2025.

                But the central noted that the macroeconomic projections were finalized before recent emergence of financial market tensions. Hence, there is additional uncertainty around the above baseline assessments.

                Full statement here.

                ECB’s Makhlouf: Too early to start planning for a pause

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                  ActionForex.com
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                  ECB Governing Council member Gabriel Makhlouf stated in a blog post that it is too early to plan for a pause in tightening of monetary policy, emphasizing the need to focus on incoming data. In a blog post, Makhlouf said, “on the evidence so far, it is too early to start planning for a pause in our tightening of policy.” He further noted that based on current evidence, restrictive rate levels are necessary to balance supply and demand in the economy and reduce inflation.

                  In separate occasion, another Governing Council member François Villeroy de Galhau emphasized the role of climate change in affecting price stability and economic activity. He highlighted that addressing climate change is not an instance of mission creep or politicization, but rather a core duty of central banks worldwide. Villeroy stated, “It’s not mission creep, it’s not a politicisation of our mandate – it is our core business and core duty.”

                  New Zealand GDP grew only 0.3%, sharp contraction in construction and manufacturing

                    By
                    ActionForex.com
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                    New Zealand Dollar drops sharply today after big miss in GDP data. GDP grew 0.3% qoq in Q3, sharp slow down from Q2’s 1.0% qoq and missed expectation of 0.6% qoq. Deep contraction is seen in both construction and manufacturing. Construction fell -0.8%, driven by a decrease in heavy and civil construction. Manufacturing dropped -0.8% “with 6 of 9 manufacturing industries declining.” Services growth also eased to 0.5%, slowest rate of growth in six years. Also from New Zealand, trade deficit shrank to NZD -861M in November.

                    NZD/USD’s recovery this week proved to be rather short-lived. Fall from 0.6969 resumed and reached as low as 0.6736 so far. Such decline is expected to extend to 61.8% retracement of 0.6424 to 0.6969 at 0.6632. For now, we’d expect strong support from there to bring rebound. Price actions from 0.6424 medium term bottom would develop into a consolidative pattern that lasts for a while.

                    German GfK: Economic expectations continued steep downward spiral

                      By
                      ActionForex.com
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                      Germany GfK consumer confidence for February was unchanged at 10.8. GfK noted that “mood of consumers paints a mixed picture. Income expectations remain stable. But propensity to buy lost ground again. Economic expectations continued their “steep downward spiral”. Economic expectation dropped -6.5 pts to 4.2. That’s the fifth decline in a row and the lowest reading since March 2016. Gfk said “Consumers feel that the risk of the German economy slipping into recession again has tangibly increased in recent weeks”. A technical recession was only “narrowly avoided” last year, with 0% growth in Q4.

                      And, “external factors are primarily responsible for the lack of momentum in the German economy.”. Gfk cited trade dispute between Europe, China and US is “causing growing uncertainty among consumers”. And, they ” worry that Germany, as a strongly export-oriented economy, would suffer negative consequences if this dispute led to trade barriers such as rising customs tariffs.” How and when Brexit will take place is far from certain and “This makes planning more difficult for companies on all sides.

                      Full release here.

                      Australia Jan trade balance: Massive AUD 1.06b surplus

                        By
                        ActionForex.com
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                        Australia recorded massive trade surplus of AUD 1.06b in January, a turnaround from December’s AUD -1.15b trade deficit.

                        Exports jumped 4% mom to AUD 33.9b, with 4% rise in non-rural goods, 54% rise in non-monetary gold. Much more than offsetting -8% fall in rural goods.

                        Imports, on the other hand, dropped -2% to AUD 32.9b. Consumption goods dropped -7%, non-monetary gold dropped -19%, capital goods dropped 1%.

                        AUD/JPY is tentatively drawing strong support from key medium term cluster at 81.48, 50% retracement of of 72.39 (2016) low to 90.29 (2017 high) at 81.34. But the bigger hurdle is on 84.34 support turned resistance for confirming short term bottoming. Otherwise, risk will remain on the downside.

                        S&P 500, DOW hit new record as up trend continue

                          By
                          ActionForex.com
                          -

                          US stocks surged sharply overnight, with S&P 500 and DOW closing at new record highs. S&P 500 rose 1.44% or 58.04 to 4077.91. It’s now close to 61.8% projection of 2191.86 to 3588.11 from 3233.94 at 4096.82. Based on current momentum, this projection is more likely to be taken out decisively than not. In that case, sustained trading above 4096.82 will confirm strong underlying medium term momentum, and pave the way to 100% projection at 4630.19. In any case, for now, outlook will stay bullish as long as 3853.50 support holds.

                          DOW has already taken out equivalent level, 61.8% projection of 18213.65 to 29199.35 from 26143.77 at 32932.93. S&P 500’s reaction to 4096.82 would help double confirm DOW’s medium term upside momentum. We’re looking at 100% projection at 37129.47 as next target. In any case, DOW will stay bullish as long as 32071.41 support holds.

                          Swiss KOF: Dropped but still indicates above average growth

                            By
                            ActionForex.com
                            -

                            Swiss KOF economic barometer dropped to 106.0 in March, down from 108.4, below expectation of 107.2.

                            KOF noted in the release that “notwithstanding this decline, the present position is still on a level clearly above its long-term average.” This indicates that in the near future the Swiss economy should continue to “grow at rates above average”.

                            Also noted:

                            • The strongest negative contributions to this result come from manufacturing, followed by the indicators from the exporting industry.
                              • Within manufacturing, clear negative outlook came from metal, followed by wood, textile and food processing
                            • The indicators from the financial sector, from the hospitality industry and those relating to domestic private consumption have remained practically unchanged.

                            RBNZ Hawkesby: Things will be evenly balanced once rates reach 4-4.25%

                              By
                              ActionForex.com
                              -

                              RBNZ Deputy Governor Christian Hawkesby said the strategy now is to get the cash rate “comfortably above neutral” to bring down core inflation. And, “that will afford us some breathing space to see how things are playing out.”

                              “Once we get the OCR up into that 4%-4.25% level we’re seeing things evenly balanced from there,” he added. “So we’d put equal weight on having to put the OCR up as we would putting it down.”

                              “The economy will evolve differently than our projections. There will be shocks that come along. There’ll be data that’s different than the forecast. And we’ll just keep coming back to what does it mean for our mandates,” Hawkesby said. “We certainly are projecting an environment where the economy cools.”

                              UK unemployment rate edged lower to 4.8% in March

                                By
                                ActionForex.com
                                -

                                UK unemployment dropped to 4.8% in the three months to March, down from 4.9%, better than expectation of 4.9%. Unemployment rate remained 0.8% higher than pre-pandemic period of December 2019 to February 2020. Employment rate was estimated at 75.2%, -1.4% below pre-pandemic level. Average earnings including bonus rose 4% 3moy, below expectation of 4.6% 3moy. Average earnings excluding bonus rose 4.6% 3moy, matched expectations. Claimant count dropped -15.1k in April.

                                Full release here.

                                US PPI slowed to 1.7% yoy, core PPI unchanged 2.3% yoy

                                  By
                                  ActionForex.com
                                  -

                                  US PPI rose 0.1%, 1.7% yoy in June, versus expectation of 0.1% mom, 1.6% yoy. PPI core rose 0.3% mom, 2.3% yoy, versus expectation of 0.2% mom, 2.1% yoy.

                                  Full release here.

                                  Asia update: Sentiments supported by stabilization in China Dec data, Yen higher

                                    By
                                    ActionForex.com
                                    -

                                    Asian markets trade mildly higher as the week opens. While China’s GDP slowed to lowest in 28 years in 2018, December data painted a picture of stabilization, with pick up in industrial production and retail sales. Sentiments were also supported by optimism over US-China trade negotiation. Focus will now move to UK Prime Minister Theresa May’s Brexit plan B, which she will table to the parliament today. Record US government shutdown is extending while it’s a holiday there too.

                                    In the currency markets, Yen is trading broadly higher for now but strength is limited, in particular against Euro and Australian Dollar. Sterling is the second weakest one, continue to pare back last week’s Brexit chaos gains. But New Zealand Dollar is even weaker.

                                    In Asian markets:

                                    • Nikkei closed up 0.26%.
                                    • Hong Kong HSI is up 0.35%.
                                    • China Shanghai SSE is up 0.41%.
                                    • Singapore Strait Times is up 0.51%.
                                    • Japan 10-year JGB yield is down -0.0053 at 0.009, still positive.

                                    Japan GDP grew 12.7% annualized, 3.0% qoq in Q4, well above expectations

                                      By
                                      ActionForex.com
                                      -

                                      Japan’s GDP grew 12.7% annualized in Q4, well above expectation of 9.5%. On quarterly terms, GDP grew 3.0% qoq, beat expectation of 2.3% qoq. Looking at some details, private consumption rose 2.2% qoq, above expectation of 1.8% qoq. Capital expenditure rose 4.5% qoq, above expectation of 2.6% qoq. External demand rose 1.0% qoq, matched expectations. Price index, however, rose just 0.2% yoy, missed expectation of 0.5% yoy.

                                      Economy Minister Yasutoshi Nishimura said that the set of data showed the economy’s capacity on recovery. Nevertheless, consumer spending remained below average. Exports could also weaken if the coronavirus infections prompts more restrictions in other markets like Europe. The country is not out of the woods yet.

                                      Also from Japan, industrial production was finalized at -1.0% mom in December.

                                      EEF Phipson slams Theresa May’s Max Fac brexit border solution as naive, unrealistic and a non-starter

                                        By
                                        ActionForex.com
                                        -

                                        The UK EEF manufacturers’ organization slammed Prime Minister Theresa May’s “Max Fac” proposal for UK and EU customs as “naive” and “unrealistic”. Max fac, or maximum facilitation, is a technological border solution that May push to implement by the time a planned Brexit transition period ends in December 2020.

                                        EEF Chief Executive Stephen Phipson said in a statement that the debate on MaxFac is “misguided”. The focus should be on whether it is good enough to “provide a frictionless border” for the “highly complex integrated supply chains with Europe. Also, focus is on whether it “can be implemented quickly enough to be ready for December 2020”. Phipson said the answer is “overwhelming no”. And, “it may have some long term benefits, but suggesting MaxFac is a solution to our immediate problems is a non-starter”.

                                        Full statement here

                                        BoJ Ueda: It’s probably more difficult to deal with an undershoot of inflation

                                          By
                                          ActionForex.com
                                          -

                                          In the press conference following BoJ’s decision to stand pat, Governor Kazuo Ueda said, “at present, inflation has exceeded 2% for 13 straight months but could fall below that level ahead. That’s why we are not normalizing monetary policy. But if that view changes sharply, we will have to change policy.”

                                          “We expect inflation to moderate, but it’s true the pace of decline is somewhat slow,” he said. “But we’re still in the early stages of the moderation. There’s uncertainty on whether the future slowdown will be a gradual one, or a quite sharp one.”

                                          “What’s important is not just our median forecast but how certain that forecast is … We won’t act just by looking at the median forecast. We’d like to look comprehensively at various data including distribution”.

                                          “We have to consider what tools we have at our disposal when inflation overshoots, and when it undershoots. When we compare these, it’s probably more difficult to deal with an undershoot of inflation.”

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